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Is this payback for the crypto Ponzi scheme posts? OK, asset appreciation without value creation is a Ponzi scheme. Let's stop rehashing, and move on to novel

Is this payback for the crypto Ponzi scheme posts? OK, asset appreciation without value creation is a Ponzi scheme. Let's stop rehashing, and move on to novel discussion angles.

ComputerGuru 5y ago
I’m going to ignore the first sentence since it’s just snark, but in response to your second: if there’s a problem that needs to be addressed, surely the first step is acknowledging its existence?
- AnimalMuppet 5y ago
  Mis-naming it doesn't help address it, though.
XorNot 5y ago
So here's the thing: if housing prices crash you still have a house. When Bernie Madoff crashed, how much stock did anyone have?
- jakeva 5y ago
  Didn't everyone who didn't sell have the same amount of stock they had before the crash? Not that it helps since you can't live in a share, or a bitcoin, but I don't know how being able to live in something makes the market around it a ponzi scheme or not.
  - XorNot 5y ago
    They never owned the stock, is the point of the Madoff scheme. If investing in Bernie Madoff's Ponzi scheme bought actual units of shares, then it wouldn't have been a Ponzi scheme. The point of a Ponzi scheme is that the current value is being supported by keeping the influx of new investors greater then those withdrawing their money. The only way Madoff's investment scheme was worth anything was if he kept new investors coming in to cover withdrawals and siphoned off the capital base to support himself.
- Johnny555 5y ago
  So here's the thing: if housing prices crash you still have a house. Maybe. Generally the economic turmoil around a housing crash means many people will lose their jobs, so they may or may not be able to afford to continue to own their house. Which is why so many houses end up getting foreclosed during a housing crash - people can't afford to make the payments, and they can't sell and pay off the loan.
  - XorNot 5y ago
    Which is irrelevant to the incorrect idea that housing market appreciation is a Ponzi scheme. The point of a Ponzi scheme is that the underlying asset was only valuable if you could resell it to someone else for more then you bought it. Housing, by definition, doesn't meet that since it's still housing. Whereas Madoff investment credits or whatever are worth literally nothing now, because they never represented any underlying asset.
    - Johnny555 5y ago
      but it's relevant when you're trying to convince someone "well at least you still have a house" after the market crashes and the bank kicks them out because they can't pay the mortgage. And unlike a stock where they only lose the value of the stock, the house could be so far underwater that they owe money to the bank even after the house is sold.
      - XorNot 5y ago
        No one loses their house because the market crashes, they lose their house if interest rates are raised heavily and they have a variable rate mortgage, or if the subsequent economic turmoil wipes out their job. This line of discussion has got a lot of weird perceptions on what a housing crash actually means. But unless you're holding investment property, then you can't lose your house in a crash without somthing else happening (and in 2008 plenty of people just defaulted on their loans, then rebought their houses at the true market value and ate the credit rating problem as the better option). That's not to say their aren't significant follow on effects, but to reiterate the core point: it's not a Ponzi scheme if you own as a result of the transaction a physical product with utility (and plenty of people do in fact own their house's outright: no housing crash will make the title deed be magically not yours, the corruption and incompetence of the US banking and court system notwithstanding - again see foreclosures in 2008).
- siquick 5y ago
  > So here's the thing: if housing prices crash you still have a house. Until your financial circumstances change and you suddenly can't afford your mortgage. Housing price crashes aren't going to happen in isolation from the rest of the economy.

Is this payback for the crypto Ponzi scheme posts? OK, asset appreciation without value creation is a Ponzi scheme. Let's stop rehashing, and move on to novel discussion angles.

ComputerGuru 5y ago

I’m going to ignore the first sentence since it’s just snark, but in response to your second: if there’s a problem that needs to be addressed, surely the first step is acknowledging its existence?

AnimalMuppet 5y ago
Mis-naming it doesn't help address it, though.

XorNot 5y ago

So here's the thing: if housing prices crash you still have a house. When Bernie Madoff crashed, how much stock did anyone have?

jakeva 5y ago
Didn't everyone who didn't sell have the same amount of stock they had before the crash? Not that it helps since you can't live in a share, or a bitcoin, but I don't know how being able to live in something makes the market around it a ponzi scheme or not.
- XorNot 5y ago
  They never owned the stock, is the point of the Madoff scheme. If investing in Bernie Madoff's Ponzi scheme bought actual units of shares, then it wouldn't have been a Ponzi scheme. The point of a Ponzi scheme is that the current value is being supported by keeping the influx of new investors greater then those withdrawing their money. The only way Madoff's investment scheme was worth anything was if he kept new investors coming in to cover withdrawals and siphoned off the capital base to support himself.
Johnny555 5y ago
So here's the thing: if housing prices crash you still have a house. Maybe. Generally the economic turmoil around a housing crash means many people will lose their jobs, so they may or may not be able to afford to continue to own their house. Which is why so many houses end up getting foreclosed during a housing crash - people can't afford to make the payments, and they can't sell and pay off the loan.
- XorNot 5y ago
  Which is irrelevant to the incorrect idea that housing market appreciation is a Ponzi scheme. The point of a Ponzi scheme is that the underlying asset was only valuable if you could resell it to someone else for more then you bought it. Housing, by definition, doesn't meet that since it's still housing. Whereas Madoff investment credits or whatever are worth literally nothing now, because they never represented any underlying asset.
  - Johnny555 5y ago
    but it's relevant when you're trying to convince someone "well at least you still have a house" after the market crashes and the bank kicks them out because they can't pay the mortgage. And unlike a stock where they only lose the value of the stock, the house could be so far underwater that they owe money to the bank even after the house is sold.
    - XorNot 5y ago
      No one loses their house because the market crashes, they lose their house if interest rates are raised heavily and they have a variable rate mortgage, or if the subsequent economic turmoil wipes out their job. This line of discussion has got a lot of weird perceptions on what a housing crash actually means. But unless you're holding investment property, then you can't lose your house in a crash without somthing else happening (and in 2008 plenty of people just defaulted on their loans, then rebought their houses at the true market value and ate the credit rating problem as the better option). That's not to say their aren't significant follow on effects, but to reiterate the core point: it's not a Ponzi scheme if you own as a result of the transaction a physical product with utility (and plenty of people do in fact own their house's outright: no housing crash will make the title deed be magically not yours, the corruption and incompetence of the US banking and court system notwithstanding - again see foreclosures in 2008).
siquick 5y ago
> So here's the thing: if housing prices crash you still have a house. Until your financial circumstances change and you suddenly can't afford your mortgage. Housing price crashes aren't going to happen in isolation from the rest of the economy.